Euro sales lead IBM to steady profit growth

Figures reflect Big Blue's new strategy, says chief financial officer

Despite narrowly missing financial estimates, IBM last week reported a growth in profits, giving a boost to the sector.

The firm's Europe, Middle East and Africa (EMEA) profits were particularly strong, showing a 23 per cent rise on last year.

For its first quarter 2003, Big Blue posted a turnover of $20.1bn (£12.7bn), up 11 per cent on the $18bn recorded in Q1 2002. Profit was up by eight per cent to $1.4bn, compared with $1.3bn last year.

John Joyce, IBM's chief financial officer, said the figures reflect IBM's new strategy, which is to invest more of its cashflow in strategic acquisitions than in stock buy-back.

"We are on track for 2003 and expect to meet the financial analysts' full-year average revenue and profit," he said. Turnover in EMEA rose by 23 per cent to $6.3bn, compared with a rise in the US of five per cent to $8.6bn.

Shamus Kelly, chief executive of IBM partner NetInfo, said this was positive news for Europe.

"There tends to be more stability and diversification of markets in Europe, so although financial trends can be the same, our peaks and troughs are not as high as in the US," he said.

In a breakdown of business units, IBM Global Services reported a 24 per cent increase to $10.2bn, although industry watchers have said this was helped by the firm's acquisition of PwC last year.

But Georgina O'Toole, analyst at Ovum Holway, said: "Without knowing the 'real' growth in revenues - in other words, without PwC Consulting - it is hard to tell how the Global Services business performed.

"This could very well translate into a revenue decline if the acquisition is excluded."

Hardware turnover fell by one per cent to $5.8bn, and software was up by eight per cent to $3.1bn.